The Tax Cuts and Jobs Act has changed the financial landscape for people getting divorced. Couples in Pennsylvania who are splitting up and have children will need to consider carefully which person will qualify as the Head of Household for tax filing purposes. In divorces that include the payment of spousal support, the new tax laws reverse long-standing approaches to deductions and taxation for alimony.
Only one parent can claim the Head of Household status and gain a standard deduction of $18,000 after a divorce. The other parent will only have a standard deduction of $12,000 as a single tax filer. The Head of Household will also be the only parent who can access the $2,000 Child Tax Credit. People who are negotiating their divorce and custody arrangement will want to think carefully about how child custody schedules could influence their tax filing statuses.
People expecting to pay alimony will not be able to deduct it as an expense from taxable income for divorces settled after January 1, 2019. Those who receive alimony, however, will not need to pay income taxes on it. The new law transfers the tax burden to payors who likely are in a higher tax bracket. This means that people negotiating spousal support might need to pursue a lower payment amount to offset tax increases.
When pursuing a divorce, a person will be confronted by many financial decisions. The advice of an attorney could clarify how tax laws will impact an individual’s finances after the divorce. A lawyer could also strive to protect a person’s rights when negotiating the terms of the divorce. The advocacy of an attorney might prevent someone from needlessly signing away assets or income. If a person strongly disagrees with the demands of a former partner, a lawyer could defend his or her position in court.